Stock market historic timings

According to conventional wisdom, any attempt to time the market is fundamentally flawed. Money managers often push this idea to the clients. It has, from their point of view, a side benefit: It helps keeps the clients fully invested at all times, which means their assets are generating more fees. Yes, most people who try to time the market end up screwing it up — they buy and sell at the wrong times — but that does not mean the idea is flawed.

What is smart timing? It is long-term timing, and it is based on following a few solid valuation metrics. It is not about trying to trade short-term.

It is not about selling stocks on Wednesday and planning to buy them back on the following Monday. It is about cutting your exposure to stocks when the market is expensive in relation to fundamentals, and keeping your exposure down—if need be, for years—until the market becomes much cheaper.

It then involves increasing your exposure, and keeping it high, again for years if necessary. Techniques available to anyone have worked, and worked well, for over a century. That does not mean they will work in the future, but it is a strong argument in their favor. But it contains two hidden nasties. And the second thing is that those returns did not come randomly.

They came in long waves—bull markets followed by bear markets followed by new bull markets. They were not random at all. This is what actually matters.

Then I looked at these returns over ten-year periods. The reason for that is that if you are an ordinary investor — rather than a trader on Wall Street — what you are usually looking for is somewhere to grow your money soundly over the medium to long term. These results are not random. They are nothing like random. The waves are as clear as — well, as clear as a big wave at Sunset Beach. If you invested in the stock market in the s or early s, you earned spectacular returns as you cashed in from the gigantic postwar boom.

And if you invested from the late s to the early s, once again you earned spectacular returns in the subsequent returns due to the huge boom from through If you were unlucky, or foolish, enough to invest in the late s, the later s, or between and , you were right out of luck. Your returns were terrible. In many cases you actually lost money on the stock market, after accounting for inflation. When you deduct taxes and investment costs—even in low-cost funds—the actual returns earned by most investors were lower still.

Remember how people tell you the indexes will never let you down if you stick with them for five to 10 years? Note also, please, that these year figures do not include any allowance whatsoever for volatility.

Someone who invested in Wall Street in and held on for 10 years earned a real return of just 0. He probably lost money. The go-with-the-flow crowd pretends that these long periods of poor performance are basically costless. While you are earning nothing in stocks, you are missing out on gains in bonds or other assets. The full cost of waiting out these bear markets is horrendous.

When you factor in the fees, the taxes, the volatility, and the opportunity cost of what you could have been earning elsewhere, the investor gets hosed. OK, some will say. I understand that if I invest in the stock market at the wrong time I may fare very poorly for a decade.

But what help is that knowledge? It would only be useful if I were able to work out in advance when those wrong times were. We can only apply intelligence guided by experience, and trust to strong probabilities. There are three measures which have a strong track record of predicting whether this is a good time to make long-term investments in U.

Some of them may even have worked since the Victorian era, though I am skeptical of stock market data going back before the World War I. Certainly they seem to have worked well since the s. Two of these measures — the CAPE and the q — are readily accessible to the public. It is popularly known as the Shiller PE ratio. It helped him just win the Nobel Prize for Economics. A summary of some of his research is available here.

The argument for using this measure is that it smooths out short-term booms and slumps in profits. When share prices have fallen a long way below that level they have proven to be a really good deal over time: Investors who got in when stocks were cheap and hung on made super returns. On the other hand, when the CAPE or Shiller PE has been much above 16, the stock market has been a much less good deal. The subsequent returns have usually been mediocre or worse.

Greece Stock Market (ASE) | | Data | Chart | Calendar | Forecast

The correlations are strong. So, for example, during the two golden ages the Shiller PE was low. In the s and early s, and again from the late s to the early s, the Shiller PE averaged about On the other hand, in the late s, and in the later s, the Shiller PE frequently rose above Clifford Asness, co-founder of money firm AQR Capital and one of the smartest market analysts around, has also studied the performance of the Shiller PE as a predictive tool.

Historically, the higher the Shiller PE when you invest in the market, the lower your likely year returns.

It is not a perfect measure, of course. The CAPE would have gotten you into stocks too early in the mids, and out again too early in the mids.

But overall someone who had used the Shiller PE to guide their investment allocation to stocks over many decades would have beaten the market. This compares the value of U. Back in , when Shiller was using the CAPE to predict the stock- market bust, British financial consultant Andrew Smithers and University of London finance professor Stephen Wright were using the q to do the same thing.

The q and the CAPE correlate remarkably closely. Both tend to rise and fall at about the same time and the same way. Today both the Shiller PE and the q show the market well above long-term averages. The Shiller PE is about 25 and the q is 0. This suggests that investors should be exercising a sharp degree of caution. The corollary of this idea is that these things can take years to play out. The market can go up a long way before it comes back down—if it does.

This advertisement is provided by Bankrate, which compiles rate data from more than 4, financial institutions. Bankrate is paid by financial institutions whenever users click on display advertisements or on rate table listings enhanced with features like logos, navigation links, and toll free numbers. Dow Jones receives a share of these revenues when users click on a paid placement. Brett Arends is a MarketWatch columnist. Follow him on Twitter BrettArends.

By using this site you agree to the Terms of Service , Privacy Policy , and Cookie Policy. Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U. Intraday data delayed at least 15 minutes or per exchange requirements.

European stocks pushed down, led by French shares, oil prices. Opinion Service industries could use a disrupter like Amazon.

NSE Holidays List | BSE Holidays List | India Stock Market Holidays

A Closer Look at Chris Wray, Trump's Pick to Lead FBI. How to protect your family members — or yourself — from elder abuse.

Trading Holidays | List of Stock Market Holidays | BSE

Money CAN buy happiness, if you spend it right. Forget ping pong, this is the hot new work perk. Updated Uber CEO Travis Kalanick steps down after shareholder revolt.

Corrected Oil finishes at a 9-month low, in bear-market territory.

You really can time the stock market - MarketWatch

Crude oil losses accelerate, prices slide 0. Home News Viewer Video SectorWatch Podcasts First Take Games Portfolio My MarketWatch. Retirement Retire Here, Not There Encore Taxes How-to Guides Social Security Estate Planning Events Columns Robert Powell's Retirement Portfolio Andrea Coombes's Working Retirement Tools Retirement Planner How long will my money last?

Economy Federal Reserve Capitol Report Economic Report Columns Darrell Delamaide Rex Nutting Tools Economic Calendar. My MarketWatch Watchlist Alerts Games Log In. You really can time the stock market. More Coverage Saudi Arabia replaces crown prince in major shakeup Use this simple strategy to profit from choppy summer trading Another part of the real estate market is starting to crumble.

Powered by This advertisement is provided by Bankrate, which compiles rate data from more than 4, financial institutions. Other News From Our Partners. APR Last Week 6 Months Low Interest We Want to Hear from You Join the conversation Comment.

MarketWatch Site Index Topics Help Feedback Newsroom Roster Media Archive Premium Products Mobile. Dow Jones Network WSJ.